Batista’s OSX Raises $1.6 Billion in Brazil Offering (Update2)
March 18, 2010, 6:24 PM EDT(Adds BlackRock comment in fourth paragraph.)
By Paulo Winterstein and Alexander Ragir
March 18 (Bloomberg) -- Billionaire Eike Batista’s OSX Brasil SA is raising as much as 2.8 billion reais ($1.6 billion) in an initial share sale after slashing the size to lure investors to an oil-services and shipbuilding company with no revenue or profits.
Rio de Janeiro-based OSX priced 3.06 million shares at 800 reais each and may sell another 490,000, according to a filing with Brazil’s securities regulator. OSX planned to raise as much $5.5 billion before reducing the offer by 67 percent this week.
While the biggest initial public offering in Brazil this year, the OSX sale failed to lure more investors because of “stretched valuations,” said Eduardo Roche, who helps manage 1.3 billion reais in assets at Modal Asset Management in Rio de Janeiro. Three Brazilian companies that had initial share sales this year raised less than sought while renewable energy company Renova Energia SA shelved IPO plans yesterday for a second time.
“These valuations that the companies are being sold are not in line with what investors are ready to pay for them,” said William Landers, who helps oversee $8.6 billion in Latin American equities at BlackRock Inc. in Plainsboro, New Jersey. “That’s why you see transactions being priced below the range, deals being pushed back. The expectations from issuers are not realistic at this point.”
The newest company in Batista’s oil, energy and mining holdings, OSX originally estimated it would raise as much as 9.9 billion reais by selling as many as 7.4 million shares for up to 1,333.33 reais each. IPO. Credit Suisse Group AG is managing the sale with Banco Itau BBA, Banco Bradesco BBI, Banco BTG Pactual and Morgan Stanley’s Brazil unit.
No Profits
OSX has never reported a profit and its main assets are 3.2 million square meters of oceanfront property in the Brazilian state of Santa Catarina and the guarantee of orders from Batista’s oil company, OGX Petroleo & Gas Participacoes SA.
“They’re a pre-operational company and people are asking for a premium discount because of it,” said Roche, who didn’t plan to take part in the IPO.
OSX’s spokeswoman declined to comment, citing the quiet period until the share sale is complete.
Fabio Cardoso, a money manager at Adinvest Consultoria in Rio de Janeiro who planned to buy OSX shares, said the company’s relationship with OGX and other Batista companies “set it apart from other shipbuilders.”
‘Good Entry’
“They won’t need to go the market to find clients for platforms,” Cardoso said. “So someone who’s looking for an investment of 3 years, 4 years, this is a good entry point.”
Batista, 53, has more than tripled his wealth in the past year and rose to the top 10 of Forbes magazine’s billionaires list for the first time last week. The son of a former chief executive officer of Rio de Janeiro-based mining giant Vale SA, he debuted on Forbes’s list in 2008 at 142nd place with $6.6 billion.
OSX’s controlling shareholders, two firms owned by Batista, may be required to purchase as much as $1 billion of new stock in a private placement to help offset the reduction in IPO size, OSX said in a March 16 statement. OSX, whose net loss last year narrowed to 33.4 million reais from 57.7 million reais in 2008, plans to use the sale proceeds to build oil platforms and a shipyard.
The billionaire has listed four companies since June 2006, including OGX, whose sale in 2008 was Brazil’s biggest at the time. The prices of those four stocks have doubled on average.
Brazil’s benchmark Bovespa index is up 1.6 percent this year after rallying 83 percent in 2009. Batista’s MMX Mineracao e Metalicos SA is leading gains with a rise of 34 percent.
--With assistance from Tal Barak Harif in New York. Editors: Alan Mirabella, Laura Zelenko
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; Alexander Ragir in Sao Paulo at aragir@bloomberg.net.
To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net
